3 Large-Cap Energy Stocks Offering Stability & Dividend Yield
Since the start of 2023, Oil/Energy has been the worst-performing sector. The space has witnessed a total return of (9.7%) in 2023 so far against the S&P 500’s gain of around 12.7%.
With investors dumping risky assets in the wake of concerns about a slowing global economy, oil has broken below $70, while natural gas is trading under $3 on the expectation of comfortable temperatures and, therefore, lighter heating or cooling demand.
Given the current state of affairs in the energy sector, it seems a wise investment strategy to search for stocks that provide a solid level of defense and often come paired with dividend payouts. A group of stocks that fulfill these criteria are the large caps — defined as companies with a market capitalization of $10 billion or more.
The Williams Companies WMB, Phillips 66 PSX and Canadian Natural Resources CNQ should be on the watchlist of investors seeking large-cap energy exposure.
Why Large Caps?
These companies possess strong financial positions, established reputations, and enjoy extensive analyst coverage. Moreover, their consistent dividend payments make them popular among income-oriented investors. Investors seeking reliability and a solid track record will find these large-cap companies appealing.
While these may offer less growth potential compared to their smaller counterparts, they compensate with a lower level of price volatility. This characteristic makes them an excellent choice for investors who prefer a steadier investment approach, free from drastic commodity price swings.
Our Choices
Williams Companies: Founded in 1908, Oklahoma-based The Williams Companies is a premier energy infrastructure provider in North America. The company’s core operations include finding, producing, gathering, processing, and transportation of natural gas and natural gas liquids.
The 2023 Zacks Consensus Estimate for Tulsa, OK-based WMB indicates 8.8% year-over-year earnings per share growth. Over the past 60 days, Williams saw the Zacks Consensus Estimate for this year move up 15.8%.
A major incentive of holding the WMB stock is dividend. Shares currently yield 5.8% annually, well above the Zacks Oil/Energy sector average of 4.5%. Reflecting a shareholder-friendly nature, the company has grown its payout by more than 5% over the last five years.
Phillips 66: Based in Houston, TX, Phillips 66 Phillips 66 is the leading player in each of its operations, like refining, chemicals and midstream, in terms of size, efficiency and strength. With its pipeline network spreading across 22,000 miles, PSX is a leader in the midstream business, generating stable fee-based revenues.
Phillips 66’s expected EPS growth rate for three to five years is currently 18.8%, which compares favorably with the industry's growth rate of 8.8%. It has a trailing four-quarter earnings surprise of roughly 13.5%, on average.
With a quarterly payout of $1.05 per share, PSX stock has a 4.6% dividend yield, above the generous sector average and significantly over the S&P 500’s 1.5% average.
Canadian Natural Resources: Established in 1973, Calgary-based Canadian Natural Resources is one of the largest independent energy companies in Canada. The company boasts a diversified portfolio of crude oil (heavy as well as light), natural gas, bitumen and synthetic crude oil.
CNQ is valued at some $58.4 billion. The Zacks Rank #3 (Hold) Canadian enengy behemoth has a trailing four-quarter earnings surprise of roughly 7.4%, on average.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CNQ pays out a quarterly dividend of 90 Canadian cents, or around 66 cents per share, which gives it a 4.9% yield at the current stock price.
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Williams Companies, Inc. (The) (WMB) : Free Stock Analysis Report
Canadian Natural Resources Limited (CNQ) : Free Stock Analysis Report
Phillips 66 (PSX) : Free Stock Analysis Report
